I’ve been investigating the NFTfi space for a while and I do think NFT perpetual products like NFTperp will attract pro NFT traders from Blur to their platform. It can also separate the NFT markets into spot markets (who care about the utility of NFTs) and perp markets (who only want to speculate the price of NFTs). Here are three major reasons behind my thesis:
1. Most current NFT users are traders.
Segmenting the existing NFT market is probably the biggest reason of the success of Blur. They clearly realised that most current NFT users are traders instead of consumers. And Opensea can’t satisfy the needs of traders. Therefore, they designed their product UI/UX, functionalities and go to market strategies all around pro traders. From the dune analytics dashboard, the trading volume of blur has exceeded Opensea for a while, so i think blur are right at this moment.
However, perpetual contracts are always a better option for traders because it can provide higher leverage, flexible short&long mechanism and deeper liquidity. Especially for NFTs trading where you can’t short a NFT and the liquidity is quite bad, the perp market will be more attractive to those pro NFT traders. Therefore, I expect NFT perp will attract many pro traders from blur to their platform in the next few months.
2. NFT projects will fight for royalty fees to death
The NFT project’s business model is much better than most FT projects’. Most FT projects made money by selling their tokens to investors and users. However, NFT is different. Their business model is similar with Binance which charges royalty fees from the trading of NFTs. BAYC team can easily make few million dollars per week by charging royalty fees. They are an exchange by themselves. Then they can use the money to create new free assets or experiences for users. Right now, many NFT projects are unhappy with 0 royalty policy on Blur. Digidaigaku also released their protocol against that.
However, there are no traders who want to pay 5+% trading fees every time to NFT projects. They need a platform that charges low trading fees. Right now, NFT perp is a better place for them to speculate price. All traders who don’t care about the utility of NFTs will go to NFT perp. And those who really want NFTs will keep using the NFT marketplace.
3. NFT perp can help attract more institutional investors and market makers
Before, those market makers and institutional investors were afraid to participate in NFT space because there is no hedge tool for them to do delta neutral and the trading fee is freaking high (5% royalty fee + 0.5% platform fee). Right now, NFT perp can help them hedge the risk and offer a low trading fee platform. With the large trading volume brought by institutional investors, the NFT pricing problem can also be largely improved by both the new perp market and the better liquidity of the NFT spot market.
In Conclusion
Overall, I'm very bullish on NFT perp products because of the above reasons. But I don't think it’s the end of NFT or NFTfi. If the only utility of NFT is trading, we can go directly to trade FT like dogecoin where the liquidity is much better. I’m always more bullish on products which can bring more utility and fun to NFT space. Happy to discuss those ideas. DM is open.
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